EMI Schemes – following the 2025 Autumn Statement

In an economic landscape where attracting, retaining and incentivising key employees is key to commercial success but can be very expensive and risky, if that recognition is through pay and that individual fails to perform or leaves we are seeing many clients seek advice in respect of other means to incentivise and motivate and invariably involves discussion around share options.

In those conversations, many clients raise the subject of EMI (Employee Management Incentives) and ask in the ever changing fiscal landscape are they still of value.

Enterprise Management Incentives (EMIs) are a form of tax efficient share option, for qualifying companies and qualifying employees.  As with share options generally, they allow an option holder to acquire an interest in shares on the satisfaction of a qualifying event, such as a business exit or after a period of time.

As with share option schemes generally, EMI’s are seen to be attractive initiatives for a number of reasons, including:

• Providing employees with an equity stake in the company is seen to provide motivation and a sense of team – promoting liability and increased economic performance.
• They enable smaller companies to compete with larger ones in terms of pay and package to attract top talent which otherwise, may price them out of the market.
• EMI options are tax efficient; if qualifying, the grant of options to qualifying employees does not fall foul of benefit in kind tax rules, upon an exit, subject to compliance with the rules, proceeds are treated as capital for tax purposes rather than income.

Whether or not a company or employee can qualify under the EMI rules depends on them meeting certain criteria, including;

• The company must carry on a “qualifying trade” or be preparing to do so. The definition is fairly broad, being one that is a undertaken on a commercial basis with a view to making profit..

A number of undertaking types are exempt from EMI, particularly around property companies and financial trading.  For those in these sectors, specialist advice ought to be sought.

• Currently, gross assets of the company cannot exceed £30 million at the time of grant – ie maintaining its purpose for small to medium sized businesses.
• Generally the company must be independent of other companies. If the company is part of a group, the qualifying company for EMI must be the parent company. It is essential that advisers understand the group structure before undertaking the implementation of EMI.
• The company (or, if relevant, a member of its group) must have a UK permanent establishment.
• The company must have fewer than 250 full-time employees (increasing to 500 full time employees from 6 April 2026). A full-time employee is calculated on a 35-hour week basis, with part-time employees counting proportionally. Its important to note that employees on parental leave do not count towards the total.
• There are limits on the size of the option pool that maybe granted under EMI rules.  Currently that pool must not exceed exceed an overall group option of £3 million (the maximum total value of all outstanding EMI options, valued at the time of grant). This is set to rise to £6 million from 6 April 2026.
• Not every employee of a qualifying company will be eligible under EMI rules. To qualify to qualify an employee must work for the company for at least 25 hours per week; if they do not, 75% of their working time must be spent working for the company. This requirement applies to all employees and includes directors.

As long as both the company and the employees satisfy the requirements to be eligible to operate and be allocated EMI options, the company can impose its own restrictions in regard to exercising the option. This can include leaver provisions, performance conditions, and time-based vesting – however the rules provide that options must vest within 10 years of grant.

Given the fiscal landscape and the Government’s drive to raise taxation are EMI’s a thing of the past? Well in short no, in fact in the 2025 Autumn statement the Government amended some of the rules to broaden those who could qualify, including raising the balance sheet cap of £30m to £120m and enabling the EMI pool to swell from £3m to £6m from the start of the 2026/2027 Tax Year.

If you would like support with any of the matters outlined above, reach out to our corporate team.